China growth beats forecasts amid signs of stability

China's economy expanded more than expected in the first three months of the year as government moves to kickstart growth helped offset weak global demand and a US trade war.

The 6.4% reading was the latest in a string of figures indicating the world's second biggest economy and key driver of global growth is stabilising after decelerating every quarter last year.

However officials warned today of headwinds.

"The national economy enjoyed stable performance with growing positive factors, and stronger market expectation and confidence," said National Bureau of Statistics spokesman Mao Shengyong.

"Given slowing global economic growth and international trade, increasing international uncertainties and prominent domestic structural issues, the task of reform and development is arduous and downward pressure on the economy persists," said Mao.

Top policymakers in Beijing last month unveiled a number of major plans to support the flagging economy with massive tax cuts, fee reductions, and financing support.

Officials pressed on with the drive to shift China to a more sustainable growth model, strengthened policies to counter the downturn and "spared no effort to put the policies into effect", said Mao.

Beijing faces a delicate balancing act as it tries to support businesses in need of credit, without further inflating its debt balloon.

New credit flooded into the financial system last month, with the growth of bank loans and total outstanding credit accelerating – thanks to measures to boost lending – though analysts say it will take about six months to spark a full economic turnaround.

"The better-than-expected first quarter figures reflect a strong March," said Julian Evans-Pritchard of Capital Economics in a note, adding seasonal factors could have contributed to the uptick.

"With credit growth now accelerating and sentiment improving, China's economy will bottom out before long if it hasn't already," he said.

The government lowered its growth target for China this year to 6-6.5%, having chalked up its slowest pace for almost three decades in 2018.

However, while growth remains relatively slow, the crucial unemployment rate remains low and fell to 5.2% in March from 5.3% in February.

China is counting on consumers and renewed investment to stabilise the economy.

The latest data showed retail sales for March rose 8.7% on-year after stagnating at 15-year lows for three months, though data last weeky revealed imports plunged in the first quarter, feeding worries about weak demand.

And infrastructure spending expanded 4.4% in the first three months, up sharply from 3.8% last year when the government stepped up a campaign against debt and financial risk.

Output growth at China's factories and workshops in March shot up 8.5% from 5.3% in the first two months, well above forecasts.

The figures come after a number of positive indicators on the economy, including improving factory activity and inflation, pointing to a brighter outlook.

Investors who have ploughed back into Chinese stocks have been counting on continued stimulus from Beijing but with the economy steadying leaders could pull back from further support, analysts warned.

"The People's Bank of China appears to be more cautious about further easing," said Raymond Yeung, an economist at ANZ bank.

"We believe that policymakers will reassess the need for further stimulus," he said in a note.

Another drag on the economy, the US-China trade war, appears to be approaching a resolution with both sides sounding notes of optimism that a deal will be done.

The two sides have exchanged tariffs on more than $360 billion in two-way trade, hurting manufacturers in China and farmers in the US.

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